Lack of Market Makers in Crypto Trading Contributes to Volatility

Lack of Market Makers in Crypto trading assets further contributes to the destabilization. From my perspective, I get constant notifications from Coinbase that tell me the last N hours had a price difference of +/- NN%. Typically 5% plus or minus. To me, these are erratic swings in prices make it very hard to predict from a short or long term perspective what the trajectory is for these cryptocurrencies. In the equities markets, there is a concept of “Market Maker” that exists to help limit the price variation, i.e. volatility. Below is a brief explanation of the Market Maker, and one capital management firm that claims they are a market maker for cryptocurrencies.

What Is a Market Maker

A market maker or liquidity provider is a company or an individual that quotes both a buy and a sell price in a tradable asset held in inventory, hoping to make a profit on the bid–ask spread, or turn.  The function of a market maker is to help limit price variation (volatility) by setting a limited trading price range for the assets being traded.

In U.S. markets, the U.S. Securities and Exchange Commission defines a “market maker” as a firm that stands ready to buy and sell stock on a regular and continuous basis at a publicly quoted price. A Designated Primary Market Maker (DPM) is a specialized market maker approved by an exchange to guarantee that they will take a position in a particular assigned security, option, or option index.

KEY TAKEAWAYS

  • A market maker is an individual participant or member firm of an exchange that buys and sells securities for its own account.
  • Market makers provide the market with liquidity and depth while profiting from the difference in the bid-ask spread.
  • Brokerage houses are the most common types of market makers, providing purchase and sale solutions for investors.
  • Market makers are compensated for the risk of holding assets because a security’s value may decline between its purchase and sale to another buyer.
  • While brokers compete against one another, specialists post bids and asks and ensure they are reported accurately.

Market Maker – Bluesky Capital Management

Liquidity problem for Token Projects

Many token companies raised a substantial amount of capital during the past 2 years. Unfortunately, many of them faced the following challenges:

Lack of liquidity: investors and project founders could not monetize their investment due to a lack of liquidity in their token
Low trading volume: traders and investors are not incentivized to trade the token because of high transaction costs due to market impact
Price manipulation: low liquidity makes it easier for bad actors to manipulate the price of a token
Low interest in the token project: difficulty in liquidating positions makes investors less likely to invest in a token project after launch
Difficulty listing on major crypto exchanges: lack of market makers and committed liquidity in a token makes it more difficult to list on major crypto exchanges, giving less visibility and interest in a token project

Market Making Program for Token Projects

By adopting a market maker who provides liquidity on pre-agreed terms, token companies can potentially expect the following benefits:

  • Higher liquidity: by having enough liquidity available in the token, investors and founders can invest or liquidate their positions more easily
  • Higher trading volume: higher liquidity potentially attracts more interest and trading in the token due to lower transaction costs and market impact
  • Lower probability of price manipulation: higher liquidity makes it more difficult to manipulate the price of a token since more capital is needed to move prices
  • Higher interest in the token project: more people trading in the token and possible listing on bigger exchanges create more interest and discussion around the token project
  • Easier listing on major crypto exchanges: more reputable crypto exchanges are more likely to list a token on their platform knowing that there is a market maker committed in providing liquidity 24/7

Market Making Program for Crypto Exchange

Bluesky Capital can support both established and new crypto exchanges to help them achieve the following potential benefits:

  • Higher trading volume: traders are more likely to trade a cryptocurrency if there is enough liquidity available because of lower market impact and execution costs
  • Lower probability of price manipulation: higher liquidity makes it more difficult to manipulate the price of a token since more capital is needed to move prices
  • Higher interest in the crypto exchange: usually liquidity attracts more liquidity, and at the same time more interest from traders and associated revenues for the exchange

How does Crypto Market Making Work?

Market making consists in providing liquidity on a defined cryptocurrency by submitting both bid and ask limit orders on a crypto exchange. Market makers make a profit by collecting the bid-ask spread over multiple trades. Fast and stable technology and proper risk management are essential to make markets successful.

Lose Ambiguity for an Increase in Market Stability?

Remember, the US Securities and Exchange Commission nor any other regulatory body does not have oversight over Crypto Exchange Markets. There is no “market maker” that is designated as a primary market maker (DPM), a specialized market maker approved by an exchange to guarantee that they will take positions in a particular assigned security, or in this case, a crypto token.

Buyers and sellers need not shed their ambiguity to gain DPM exchange/market stability, just the one (or more) designated “market makers” authorized by the crypto exchanges to become market makers. Only these individuals, brokerages, or other managed funds need to reveal their crypto account IDs, which should reinforce/reflect confidence in the market. By these players entering the market as DPMs, and publicizing their roles, volatility should decrease over time.

All other buyers and sellers can remain anonymous; that doesn’t change.

Coinbase Bytes: The Countries Leaning into Crypto

CRYPTO WORLDWIDE

From Brazil to Nigeria, global crypto adoption is on the rise despite market uncertainty

One of the hallmarks of a crypto downturn is a steady drip (or deluge) of negative headlines, and this summer’s seen plenty already, from crypto prices plummeting to overextended crypto firms with liquidity issues. But this means promising developments, including the gradual rise of global crypto adoption, often fly under the radar. A new report from Boston Consulting Group indicated that one billion people could be crypto users by 2030; and for the past several months, countries in Africa, South America, and the Middle East have increasingly explored crypto tech. Let’s take a closer look at some key developments around the world.

Europe and Africa saw an increase in crypto venture deals in Q2, bucking a 22% global decline in venture funding last quarter. While Africa saw a 189% jump to $280 million in fundraises, Europe recorded a 25% spike to $1.8 billion, led by investors including Animoca Brands, Coinbase Ventures, and Polygon Studios, per The Block. The U.S., meanwhile, saw a 24% decline, but still led overall with $5.4 billion raised. (Check out Coinbase Ventures’ full Q2 recap.)

Honduras, Brazil, and Paraguay are expanding Latin America’s crypto footprint, nearly a year after El Salvador legalized Bitcoin. Paraguay’s senate passed a bill in mid-July that creates regulatory frameworks for crypto exchanges and miners (it now awaits the president’s signature). The bill could play a major role in attracting mining firms to Paraguay, which boasts cheap and renewable hydroelectric power. Meanwhile, Brazil’s largest crypto exchange, Mercado Bitcoin, is looking to expand operations in Mexico in the second half of the year as regulatory talks enter their final stages. And Honduras is experimenting with “crypto tourism” by turning the town of Santa Lucia into “Bitcoin Valley,” with 60 local merchants planning to accept crypto payments.

Africa, home to some of the world’s highest-inflation countries, has seen a flurry of crypto developments in recent months. Nigeria, which has the continent’s largest economy, has seen its citizens pile into crypto to shield wealth as they continue to lose confidence in the weakening Naira. Since becoming the second country after El Salvador to legalize Bitcoin this May, the Central African Republic last week launched Sango Coin, a national digital currency meant to attract foreign investment and boost the country’s mining sector (so far the token has had a slow start). Meanwhile in Kenya — which ranks fifth-highest globally in digital currency ownership — a climate activist sold NFTs to fund a 30-foot sculpture made from recycled plastics.

In the Middle East, Dubai announced a “Metaverse Strategy” which aims to add $4 billion to its economy over the next five years by quintupling the number of metaverse and blockchain companies and supporting 40,000 virtual jobs. The metaverse is also having a moment at global academic institutions. The University of Pennsylvania’s Wharton School is launching an online course called “Business in the Metaverse Economy;” The University of Tokyo will also begin offering similar courses; and The Hong Kong University of Science and Technology plans to build digital replicas of its campuses in the metaverse.

Why it matters… Just like it’s wise not to be overly optimistic during the frenzied hype of a bull market, it’s also important not to be excessively pessimistic during bearish downturns. In fact, smart investors will tell you that bear markets are inevitable — and are often when fortunes are built. During June’s crypto market crash, “Shark Tank” investor and crypto convert Kevin O’Leary remained bullish about the sector’s long-term future. One of the main reasons?  “Look at an MIT graduating class of engineers,” O’Leary told Markets Insider. “The smartest people want to work on the [block]chain.”

Coinbase Bytes: The countries leaning in to crypto

Good til Canceled (GTC) Crypto

Core Trading Platform, First and Foremost

In part, I blame the uneducated/uninformed investor for taking a loss on the downturn of Crypto. Shame on us. On the other hand, the crypto currency exchange markets, such as Coinbase, make it so easy to make a purchase of Bitcoin. The Coinbase exchange, iPhone app provides a “Simple” trading screen so none of the “Advanced” features are present. In fact, the Coinbase iPhone app doesn’t even expose/mention the more “Advanced” capabilities which, if leveraged, could have prevented investors’ significant losses.

If any type of regulatory body, such as the U.S. SECURITIES AND
EXCHANGE COMMISSION (SEC)
steps in to attempt to regulate these crypto exchanges, there are several minimally intrusive opportunities to prevent a “crypto crash” in the future. A few suggestions:

  • Education, specifically around hedging risk by using features already built into the crypto exchange platforms, such as a “Stop Limit Order”. Curtailing risk in the future may look like a required one hour online course and quiz before allowing an investor to execute transactions. For example, the Series 7, General Securities Representative Qualification Examination.
  • Temporary halt in trading like we see within stock markets. For example, volatility halts are single stock circuit breaker halts that trigger 5-minute halts on fast price spikes or drops that exceed the acceptable trading price range (ATPR) for 15-seconds. The ATPR is calculated as the average price of the previous 5-minute trading period.
  • Financial products available to the retail investor for hedging crypto losses, e.g. currency swaps but using crypto on one side of the swap?
Opportunity to Hedge Cryptocurrency Losses and Volatility

When buying stocks, traders have the ability to put in buy and sell orders that expand beyond real-time (i.e. current market value) or end-of-day (EOD) transactions. A SELL order that remains open allows the trader to minimize his risk by stating the amount he is willing to lose. For example, a SELL order can specify the stock price to exit the position and the volume owned to sell, i.e. total or a subset of stocks owned.

Traders can also put in a BUY order, good until canceled, allowing a trader to specify when he is willing to take a position in the stock.

What is a Good Til Canceled?

Good til canceled (GTC) order is an investment order to buy or sell a security or stock at a specified set price that remains in effect or active until it is executed, or the investor cancels the order.

https://thebusinessprofessor.com/en_US/investments-trading-financial-markets/good-til-cancelled-definition

It was unclear to me from the Coinbase.com documentation how long the Limit Orders are good until. Limit Orders have the potential to minimize your risk exposure.

Limit orders: Limit orders allow you to manually select the maximum price for your buy order and minimum price for your sell order — it will execute only if that price is hit (which means there’s no guarantee your trade will be executed). As a buyer, you might want to use a limit order if you believe the market is moving lower. One important thing to remember: all the prices you see in the order book all represent limit orders, because market orders get filled right away.

https://www.coinbase.com/learn/advanced-trading/what-is-an-order-book

What is a stop limit order?

Stop-limit orders allow you to automatically place a limit order to buy or sell when an asset’s price reaches a specified value, known as the stop price. This type of order can help traders protect profits and limit losses.

https://www.coinbase.com/learn/advanced-trading/order-types#stop-limit-order

I reached out to Coinbase Support on Twitter for comment regarding how long limit orders are good until, and they responded swiftly, “Good til Canceled” as I would expect. Excellent support.

Hi there, happy to answer your question about limits orders. You are correct, they are good til canceled: if posted, the Order will remain on the Order Book until canceled by you (the Trader). Hope this helps, all the best!

@CoinbaseSupport

Disclosure

Content is for informational purposes and is not investment advice. Investing in crypto comes with risk.

Bitcoin has Dropped 52% since Jan 14 2022

On November 9th, 2021, Bitcoin BTC was valued at ~67k. I waited and bought in on January 14th at 43k. BTC. Like many others, I continued to buy in “on the dip” with an overall moderate investment. Months later I am in disbelief at the deep devaluation of cryptocurrencies across the board, specifically BTC, which I thought would be the best crypto to steer clear against significant loss of value.

In Bear Markets, Investors Shift from Equities to other Asset Types. Why not Crypto?

Commodities, Oil, Precious Metals, and the like are typically the safe haven when there is an equities bear market in effect. It appears Cryptocurrencies as an “asset class” don’t share that same safe haven status. Why not?

Crypto not Sustained by Global Black and Grey Market Transactions?

Lots of illegal and grey area transactions in the world where anonymity should bolster the market evaluation of Cryptocurrencies, but that’s not what we see here. Clients may be shifting/leveraging more traditional ways in finance/trade which have low tech solutions, and countries/territories with loose banking regulations. It may even be beneficial to induce a cryptocurrency crash to reinvigorate the traditional approach that institutions and individuals that broker these opaque transactions.

Are we in a cryptocurrency bubble, bursting in progress?

The housing market will continue to go up. Why not cash in on a variable rate with a loan of over 90% of the house asset. Sound familiar?

Cash is King: “On Demand” Cryptocurrency Transactions

In the new world of Cryptocurrencies, leverage a “Just in Time” crypto transaction going from cash to crypto and back to another currency held in ringfenced countries with loose regulations. Holding long term assets that are affixed to cryptocurrency, such as NFTs, should be a relic of the NFT evolution. Assets, digital and physical, should appreciate over time without the impediment of a highly volatile, underlying currency.

Volume and Volatility

Significant volume trading drives price speculation upward or downward. Electronic trading tied to financial models for trading execution could make the underlying asset wildly volatile, especially with a relatively new asset class, such as cryptocurrency. Conflicting financial models could appear to be as a Tug of war maintaining both maximizing asset value and liquidity.

Influential Events – Impact on Markets

Sometimes there could be a direct correlation between an event, such as a drop in the temperature, which impacts the price of buying gas (i.e. heating) commodity. Sometimes events, such as the drop in cryptocurrency, are not readily transparent on the open markets, and have assets wildly traded based on spec. As romantic as it sounds, we need not look at the “butterfly effect” to grasp the windfall of the BTC current value.

Invasion of Ukraine by Russia

It’s very possible that countries, and their ultra wealthy citizens could have significantly “bought in” on cryptocurrencies, especially at the height of the valuations last year, and now with a war in their backyard feel more comfortable with traditional, safe haven, assets, and are backing out of their positions. If trades are unwound to fast, it could drive the price of the asset.

Bolster National Economies of South America

Some countries have sought to adopt cryptocurrencies in lieu of their native currency in order to prevent against sky high inflation. If one country, such as Russia, and their Russian oligarchs decide to pull out “liquidate” vast volumes of cryptocurrency driving the price down, there will be significant impact to nations who have adopted the cryptocurrency in lieu of their own. Devaluation of the asset verses unmanageable, high inflation.

Price of Crude Oil, and Gas at all Time High

Crude Oil has been on the rise since April 2020 from ~ 16 USD to the 52 week high of ~130 USD. Has supply and demand had a major impact to oil prices, shifting from crypto? Is/was the pandemic a driver? Less travel, weakening demand. Tightening supply from Russian sanctions on Oil And Gas shifting spending from crypto to oil?

Price of Goods and Services increases by significant Inflation

Saying the value of goods and services are effected by the events around us is a fair assessment. Looking at the most basic of consumer flows, farm to plate, butter and milk have seen prices risen. Less money available for investments due to a rise in nondiscretionary spending?

Shoppers across America are noticing inflation in prices on many everyday items, and milk got its moment in the spotlight after a CNN interview with one family went viral. It’s true: retail prices for a gallon of milk are up 26% at an average of $3.59 since bottoming out at $2.84 in July 2018.

OC Register

Derivatives – Currency Swaps to Hedge Crypto Risk?

There have to be financial instruments available, or can be packaged to balance the adverse effects of a very volatile cryptocurrency. How accessible are these financial products to the “common” investor, is beyond my speculation, but these are stop gap efforts, and will not resolve the underlying problem with cryptocurrencies.

Artificial Inflation, Pumping in additional BTC by Mining Crypto

I’m not saying this is a “thing” based on other posts and popular opinion, but it could be a factor, at least as an artificial reason / sentiment to flee crypto.

NFT Markets without Cryptocurrency

Big Brands, Big Bucks, Minimizing Risks

Several Digital Asset Marketplaces are using the NFT model without the “risk” of using volatile cryptocurrency, i.e. value fluctuations of crypto, e.g. Ethereum.

In NFT Marketplaces we don’t have to buy and sell using cryptocurrency?

non-fungible token (NFT) is a non-interchangeable unit of data stored on a blockchain, a form of digital ledger. Types of NFT data units include digital files such as photos, videos, and audio. Because each token is uniquely identifiable, NFTs differ from blockchain cryptocurrencies, such as Bitcoin.

Non-fungible token on Wikipedia

Are NFT Marketplaces using Blockchain?

By definition all NFT Marketplaces are using Blockchain, but don’t necessarily need to be based on Cryptocurrencies for the buying and selling of digital assets.

The goal of blockchain is to allow digital information to be recorded and distributed, but not edited. In this way, a blockchain is the foundation for immutable ledgers, or records of transactions that cannot be altered, deleted, or destroyed.

Blockchain Definition: What You Need to Know – Investopedia

So, in lieu of cryptocurrency, some NFT Marketplaces are using Fiat money. What is Fiat money?

Legal tender is fiat money, or currency (bank notes and coins). It has value because a government creates it and backs it, and people using it have faith in its value. Fiat money such as US dollars can be used as an exchange for goods and services.

Legal tender – Simple English Wikipedia, the free encyclopedia

Hey batter, batter, batter, batter! Swing, batter!

Major League Baseball (MLB) is now live on the Candy MLB NFT Network. Their Marketplace Opening Weekend (1/14/2022) produced stellar results:

With over 15,000 sales in three days, our secondary marketplace got off to a memorable start in its opening weekend. Join those fans who have already built up their collection by adding your favorite MLB stars and moments to your wallet.

Email correspondence from info@candy.com 

Stipulations

The Candy NFT Network accepts ONLY USD and is available in the US and Canada. The MLB NFT Platform is still in “BETA” mode as it appears in small characters on the top of the page. This just means that you may find bugs in the system. I just found one now using Chrome, and the “Sort By” feature on the top right of the screen.

What is a [Digital] Asset Class?

An asset class is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations. Asset classes are thus made up of instruments that often behave similarly to one another in the marketplace.

Investopedia.com

Where will people flock to sell and buy their digital assets? That may depend upon the [digital] asset class the assets align under. For example, NFT Art may be the simplest NFT Marketplace to buy and sell works of digital art. However, collectables that go under extreme scrutiny, such as Sports Memorabilia may gravitate toward NFT Markets with less volatility from a cryptocurrency. Under normal, fiat paying conditions, those who invest in memorabilia are looking for stability in an investment from traditional, physical memorabilia. We can assume that same digital asset class of memorabilia would be sought by conservative investors, and would minimize risk when the time comes to sell the digital asset. Art NFTs are a gamble in may cases, and one might argue, so is cryptocurrency.

Experience an NFT Marketplace with One Digital Asset Class

Obvious benefits, functionality around the NFT marketplace with a single asset class allows the owners of the platform to specifically cater to their primary audience. Features that you might see with an Art NFT marketplace might differ from a sports memorabilia NFT Marketplace. Also, lots of traditional, physical assets that morph to digital assets have a rich history, and experience sought by particular collectors. If you go to an NFT marketplace without a specifically catered to digital asset class, the buying and selling experience will be muted by comparison.

MLB NFT Marketplace with “Custom” Properties

Because of the single [digital] asset class of baseball memorabilia, the Candy NFT Platform can deliver a unique experience to their buyers and sellers. Each of the digital assets are showcased to accentuate their customer base loyalty such as the classic baseball trading cards, but now digitized. Each baseball “player” card has a set of unique digital properties, recognizable by the physical trading card collectors, such as a “Player Bio” including age and height.

Even referencing the “classic” style NFT Marketplace functionality has it’s own unique display, such as List Date, Edition #, and even a “Get it Now” button. There are other types of digital assets particular to the MLB NFT Marketplace, such as a “World Series Trophy” NFT, and a “MLB Play of the Day” (Below).

Veve Digital Collectables – Marvel NFT Marketplace

Another great example of a digital asset marketplace using Fiat tender instead of Cryptocurrency. Comic books also have a rich history of physical collectibles with an eye toward a stable investment over time. Buying and selling with cryptocurrency adds volatility that a conservative investor may not want.

Mint Comparison (Part Two): OpenSea.io verse Mintable.com

Before reading this post, it’s suggested you read Part One focused on the OpenSea.io NFT Marketplace

Mintable.com – The Basics

Select “Mint an Item” from the main menu on the page header. Mintable allows you to share your existing NFTs already minted from another NFT marketplace, or mint a new item. Note: not all NFTs already minted are compatible. For example, OpenSea minted items are not compatible. Select “Create a new item”.

Before proceeding to mint a new item, there are relatively new minting options. “Gasless” or “Traditional Minting”. From what I understand, “Traditional Minting” requires a Gas (Fee) upon minting of the digital asset / NFT transaction, and the new “Gasless” option puts the Gas/Fee on the acquisition/purchase of the digital asset.

Another option before the minting process is “Which Blockchain do you want to mint on?” , and the choices are “Ethereum Mainnet”, the traditional blockchain , or “Immutable X”.

Immutable X uses a validity-based proof. Validity-based proof means that your assets can never be traded without your permission, which is the same security measure as the Ethereum mainchain, and your items can never be taken from you either. Nov 5, 2021

What is Immutable X? Ethereum’s First Layer 2 For NFTs

Select the classic options, Ethereum Mainnet, and Traditional [Mint], then “Proceed to Mint”.

Create and List an item for sale

Another difference between minting an NFT on Mintable.com and OpenSea.io is that when minting on OpenSea, the collector/user is allowed to mint an item without selling the digital asset. On Mintable.com, you mint and post the item for sale at the same time. On OpenSea, the user can mint new NFTs to collections of digital assets without needing to sell them.

The first step in the Mintable.com “Mint an Item”, or “Create and List an item for sale”, is to categorize and subcategorize the digital asset. The user is required to add this metadata about their digital asset. You can see why this would be a benefit, such as searching the marketplace for particular items to purchase. On the negative side, users minting assets are cornered into slots to categorize their work..

“What kind of item are you making?”

  • Art
  • Music
  • Videos
  • Collectibles
  • Sports
  • Utility

“Select Sub-category” has lots and lots of choices for each kind of digital asset.

“Mint in the Mintable Store” option to place your Digital Assets in the “generic” store verse a user defined store. A user defined store, similar to a collection from the OpenSea perspective, allows you to place your digital assets in a collection/store and popularize your assets based on the store front. Its a selling tool as well as a method to collect your works.

Once you select the Store option, a Token Address and Token ID is generated automatically for the digital asset / NFT.

Token name” – This is the name of the NFT on the blockchain that will be displayed everywhere.

Listing Title” – This is the name of the listing on Mintable. Can be the same as the Token name.

Listing Subtitle” – This is the listing subtitle

Listing Tags” – Use a comma, tab, or enter to separate your tags. Tags help your item become more searchable.

Add Files” – Images, Videos, and GIFs. The digital assets being declared as unique, and ownership by the person creating the NFT.

Other Metadata” – Add extra data on your token (maximum of 20 data allowed). Key / Value pairs of metadata for the Digital Asset.

Item description” – allows the user minting the digital asset to provide a long description for this NFT.

Transfer Copyright when purchased?” Yes/No Checkbox

Allow buyer to resell?” Yes/No Checkbox

Price and Type” – Fixed, Auction, Auction with Buy Now

Fixed price – in USD or ETH

Auction “Starting Bid Price

Auction Length” – from 12 hours up to 7 days

List this Item” button

Comparison Summary

The Sniff Test

Mintable.com has an interesting feature that “scans” the user’s digital asset attributes using some type of object recognition then scans the internet to see if, in fact, the proposed digital asset is unique. So far that feature is exclusive to Mintable.com . This process takes place when the user goes to mint the proposed NFT.

Collections and Stores

OpenSea.io provides their marketplace users the ability to create Collections to group their NFTs as they see fit, and as of this writing, that is a free feature. Mintable.com provides their NFT Marketplace sellers the ability put up a storefront, which a user may use to sell similarly designed NFTs. There appears to be a significant cost to using one’s own store, or a user may use the generic Mintable.com store.

Interoperability / Portability

Both platforms, OpenSea.io and Mintable.com have the ability to add metadata to the NFT being minted using key/value pairs allowing for compatibility cross platforms, I.e. other NFT marketplaces or multiplayer online gaming, for example. As standards for cross platform NFTs develop, these key/value pairs may contain JavaScript or HTML.

NFT Portfolio of Projects and Opportunities Abound

Considering my Draft Kings account was down to around 3 USD, and I didn’t want to put anymore money into the account for at least the rest of the 2021 / 2022 NFL season, I decided to look elsewhere for gambling and investment opportunities. I’ve wanted to look into NFT marketplaces for a long time, so I Googled and found that Open Sea was on the top of many lists as the best marketplace, and that began my path to perdition.

I have some vague sense of what constitutes an NFT, a digital asset, or at least a marketable friendly “sellable” one. I have a ton of questions that I hope will put “guard rails” on what is a marketable, sellable NFTs. There is also an “out of the box” thinking when it comes to producing new NFTs, as many graphic artist types are creative, out side the box thinkers, in general.

Why do we need NFT Marketplaces leveraging Blockchain technology (i.e. decentralized, replicated transactions, and immutable storage)? We already have public exchanges for licensing digital content, so was Blockchain absolutely necessary to license/sell digital assets (i.e. images)? Regardless, the adventure begins.

I started by leveraging assets I already owned, physical comic books, thousands and thousands of them dating back from the early 1980s, and a bit before. I’ve started to methodically review each of the comic book’s cover art, and make the choice to elevate my physical copy into my digital collection. As of this writing, I’ve created two digital collections on the Open Sea NFT Marketplace, Comic Book Cover Art, and Variant Comic Book Cover Art. I’m in the process of scanning all of the physical comic book covers selected, and posting them to my Cover Art digital collection. At this point, there is a question of digital ownership for sale: Even though I purchased the comic book, but I did not modify the cover art from the original artist who created that book, does this still allow me to create and sell the NFT cover art? Also, I may be allowed to Create/Mint an NFT based on Marketplace rules, or lack therein, but is there value in MY digitized copy as well as the comic book publishing company? Buyers and sellers dictate value.

In order to try and diversify my NFT offerings, I’ve been experimenting with the original cover art, and creating “variants” to the original cover art. Comic book companies make their own variant covers for the same comic book, but that’s not what I am talking about in this instance. I’m modifying the colors to accentuate certain aspects of the cover art to provide my own perspective of “the trailer” for comic books.

Portfolio of Projects

I’ve decided to “play my hand” at NFTs: acquisition, creation, and curation while highlighting the challenges and opportunities along the way, although I’m not convinced the creation of NFTs is beyond the bounds of marketers and graphic artists. Here’s the rabbit hole I’m pursuing to identify and exploit opportunities in NFT marketplaces. As my comprehension expands in this subject matter, I may retract some of my statements. 🙂

The Priceline.com for Comparing Gas Transaction Fees

Before you mint your NFT, compare Gas Transaction Fees “in Realtime” from multiple NFT Marketplaces in parallel. Then select the NFT Marketplace with the lowest fee to initiate the Mint process. I just had the experience of purchasing an NFT, and the digital asset price was significantly less than the FEE I paid to commit the transaction. Wow!

Digitize Best of Comic Books, Cover Art Collection

Sentimental fool I am, I’m handpicking from thousands of my physical comic books in my collection to scan, and mint. Don’t try this at home folks. Not sure there are many buyers of this type of digital asset / NFT.

Digital Image Variants

Leveraging proprietary software I’ve created, modify existing digital images, i.e. Comic Book Cover Art, into variations of covers. This option puts me more into the artist/creator role, which seems to be a bit more satisfying than digitizing existing physical images unchanged. There also is probably more value in “unique” minted, images. Looking forward to developing this proprietary software I’ve produced to find even more creative, and consistent ways of modifying existing digital art/images.

Movie Like Trailers for Traditional Static Media

Sample Trailers coming to an NFT Marketplace near you:

  • Comic book cover art comes ALIVE! While you’re in your local comic book store, you scan a code off the back of a comic. That scan will launch an NFT marketplace with the full motion animation/video which can entice the potential buyer to become a buyer of the comic, and perhaps the NFT as well. NFTs selling physical assets.
  • Is the back cover of the paperback and hardcover book obsolete? Have an autio narrative excerpt spoken by the author as the audio/digital NFT.

Encryption and Decryption of Digital Assets

I’m an “old school” guy when crypto was purely a reference to cryptology, encryption, and decryption, and not cryptocurrency. I’m looking to explore the “art” of integrating messages into images.

Pixelate and Revert Images

Leverage the motion of images to go from an obfuscated, opaque, pixelated image, and turn into another image.

Digital Watermarks for NFTs?

In the world of licensing image content on the internet, embedding watermarks in images are commonplace. There is an apparent lack or need for embedding watermarks in images to discourage unlicensed distribution. However, can watermarks play an artistic role for NFTs?

Embedded codes with AI Object Recognition?

Leveraging AI object recognition, artists may use a tool to imprint, insert standardized, embedded code to the NFT unique object ID. This can be done by tagging the digital asset with the NFT ID as metadata or embedding the code into the NFT in a non-intrusive way, and the tool can handle NFT types differently (i.e. Video; Images, etc.)

Develop Creative Brands

Monkeys, really? 🙂

Automation Opportunities: NFT Marketplace Events

At first glance, I do not see opportunities to interface with NFT marketplaces, such as an API layer, which enables the programmer to key off an event such as a “mint” event within a specific collection. If NFT marketplaces become high volume auctions, there become lots of opportunities for automation:

  • Bidding on NFTs via API and 3rd party applications
  • Creating searches for NFTs, once minted, with the following XYZ properties.

Marketable, Sellable NFTs? What’s the next Niche?

Established brands that lend themselves well to collecting/collectibles should immediately have a group following based on their current fan base for their physical objects:

Sports

Many sports leagues already have commotozied their assets (e.g. teams, players) through licensing and marketing their athletes in “trading cards” will have a natural progression into digital assets, i.e. NFTs.

In order to be really successful, it’s not just about “lifting the image off the page”, but DIGITAL marketing firms who represent these brands should be enhancing the card to a digital media showcase. Some examples for sports NFTs is the name of the NFT is “Johnson Smith’s Best Play of the Season for 2021”. Johnson Smith may have multiple NFTs from the same marketing company, such as every player has a “basic” statistics card, and then showcase NFT pieces on top.

Sports video games can integrate with avatars/characters that have developed an “AI” chatbot as the sports player. These NFT athletes customized to the buyer/owner’s liking can be uploaded and used within the video game.

Established Media Channels – Magazines and Newspapers

Struggling newspapers and magazines from declining advertising and subscribership can turn a corner and go “all in” with this new NFT channel of opportunities. For example, National Geographic has decades of high-quality media from their magazine and archival footage that never made the magazine page. The key to implementing an NFT strategy may require outside digital marketing agencies to come in, take inventory, and propose a roadmap of products to implement.

Increased Demand for “Creative” Software Needed

The need to put video and image editing software in the hands of laymen wanting to participate in the NFT marketplace will continue to soar. Companies like Adobe with their suite of products may dominate, but the real niche is making the software accessible/usable for newbies making the threshold for market penetration lower. Animation software will thrive because of the high production value, and negligible, comparative cost to video productions.

Forced Action to “Delist” or Litigation for NFTs – Beware Jumping on Known Brands without NFT Presence

Although a brand with fully licensable products as a current strategy decided not to jump into the NFT realm…just yet, postponing the spend for designing, implementing, marketing, and selling NFTs.

Jumping on established brands, developing NFTs, may come back to haunt you.

Good News – NFT marketplaces seem to have taken a less intrusive stance, and do not have AI object recognition for automatic warning before minting your digital assets. NFT minted image digital assets may only slightly vary in any given collection, which may inhibit the accuracy of AI object recognition.

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